Extended definition
Cost of vacancy puts a price on an empty seat. When a role is open, work either doesn’t get done, gets done late, or gets covered by someone else at extra cost. Cost of vacancy adds that up and expresses it per day, so a hiring delay can be weighed in the same currency as everything else in the budget.
It’s easy to confuse with the other cost metrics, but each answers a different question:
- Cost per hire is what you spend to fill a role: advertising, agency fees, recruiter time and tools.
- Hiring ROI is the value a hire returns compared with what it cost to make.
- Cost of vacancy is what you lose while the role stays empty.
Put together, they make a stronger case than any one alone. Spending more per hire can be the cheaper option if it shortens a costly vacancy.
How to calculate cost of vacancy
The basic formula is:
Cost of vacancy = daily value of the role × days the role is vacant
The hard part is the daily value. There are three common ways to estimate it:
- Revenue roles — Take the revenue the role is expected to generate in a year and divide by working days. This suits sales and other roles with a direct revenue target.
- Non-revenue roles — Use the role’s total annual compensation as a floor, on the logic that the business pays at least that much because the work is worth at least that much. Divide by working days.
- Cover costs — Add what you actually spend to keep the work going: overtime, contractors, temporary staff or penalties for missed deadlines.
Here’s a worked example with illustrative numbers. A sales role is expected to bring in $600,000 a year. Over 240 working days, that’s $2,500 a day. If the role takes 60 working days to fill, the cost of vacancy is 60 × $2,500, or $150,000. Some teams subtract the salary not paid during the vacancy. If you do, say so, because it changes the result.
The cost doesn’t stop on the start date, either. A new hire isn’t fully productive on day one, so the gap closes gradually over their time to productivity. The vacancy length itself usually comes from your time to fill data.
Why cost of vacancy matters
It turns hiring speed into a number finance recognizes. “We need another recruiter” is a request. “Every week this sales role stays open costs us about a week of its expected revenue” is a business case.
It also helps prioritize. Open roles don’t all cost the same. A vacancy in a revenue-generating or bottleneck role costs far more per day than one where the work can wait, so it deserves more of the team’s time and budget.
Common mistakes and misconceptions about cost of vacancy
- Counting all revenue as lost — Colleagues absorb some work, and some deals are delayed rather than lost. Adjust for what’s actually gone, or the number won’t survive a finance review.
- Using one figure for every role — A daily value for a sales role says nothing about an HR coordinator. Calculate per role or role family.
- Mixing calendar and working days — Pick one and use it for both the daily value and the vacancy length.
- Ignoring hidden costs — Overtime, burnout and delayed projects are real, even when they’re harder to price.
- Using it to rush the hire — A shorter vacancy isn’t a saving if it produces a bad hire. Lower the bar and you can trade a cost you measured for a bigger one you didn’t.
- Building it alone — Agree the assumptions with finance first, so the number gets used rather than argued about.
Frequently asked questions
How do you calculate cost of vacancy?
Multiply the daily value of the role by the number of days it's vacant. For revenue roles, the daily value is the expected annual revenue divided by working days. For other roles, annual compensation divided by working days gives a conservative floor. Then add what it costs to cover the work, such as overtime or contractors, and state whether you've subtracted the salary saved while the seat was empty.
Is there a cost of vacancy calculator?
You can build one in a spreadsheet with a few inputs: the role's expected annual revenue or total compensation, working days per year, the days the role has been or will be open, and any cover costs such as overtime or contractors. Multiply the daily value by the days open and add the cover costs. Keep every assumption visible, because finance will want to check them before trusting the total.
What is the difference between cost of vacancy and cost per hire?
Cost per hire is what you spend to fill a role: advertising, agency fees, recruiter time and tools. Cost of vacancy is what you lose while the role stays empty. They pull in opposite directions. Cutting cost per hire can lengthen a vacancy, and spending more to hire faster can cost less overall. Looking at both together shows which trade-off makes sense for a given role.
Should cost of vacancy subtract the salary you save?
It depends on what you want the number to show. Subtracting unpaid salary gives a net figure and is more conservative; leaving it in shows the gross value lost. Either is defensible if you say which one you used and apply it the same way every time. For roles valued at their compensation, subtracting salary cancels the estimate out, so count the cover costs instead.
How do you calculate cost of vacancy for non-revenue roles?
Use the role's total annual compensation, including benefits, divided by working days as a floor for its daily value. Then add the actual costs of covering the work, such as overtime, contractors or delayed projects. For roles that unblock other people, such as an engineer on a product launch, the cost of the delayed work can be far larger than the salary, so estimate it with the business owner.